Today’s fiscal announcement was far smaller and less detailed than many had hoped for. The explanation, we think, is that China’s leadership sees less need for stimulus than most commentators (we’re with the leadership on this). Its priority instead seems …
8th November 2024
A strong recovery in occupancy and operating performance following the pandemic has helped European hotels to outperform other sectors on average since 2022. However, this rebound is now fading and the outlook for hotel demand looks weak given the soft …
Fed slows pace of rate cuts; independence probably safe As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the …
7th November 2024
Mexico is one of the most vulnerable economies to the policies that US President-elect Trump flagged on the campaign trail. This Update looks at the channels through which it could be affected. One key point in all of this is that policymakers don’t have …
We have revised some of our key market forecasts in response to Donald Trump’s victory and the news that the Republicans are on course to regain full control of Congress. These include higher projections for the 10-year Treasury yield and the greenback. …
Watch a recording of our post-MPC online briefing here . While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only gradually. We agree and due to the Budget (and not the US …
The collapse of its coalition government, triggered by disagreement over fiscal policy, means Germany will probably have a CDU-led government by mid-2025. This may be more stable and functional than the outgoing coalition, but would face the same …
Today’s 50bp cut is likely to be the only one in the cycle for the Riksbank, and we expect it to cut by just 25bp at its next two meetings to take the policy rate to its “terminal” level of 2.25% in January. This is less than the four cuts that market …
COP29 – which is set to kick off in Baku next week – has been dubbed the ‘finance COP’ given that the top priority for negotiators will be to agree on a new climate finance pledge. However, Trump’s election victory looms large over the event and adds to …
Alongside its decision to leave interest rates unchanged today, Norges Bank reiterated that it expects to remain on hold in December too. It is likely to start cutting in Q1 next year and we suspect that it will then loosen policy a little more quickly …
The recent weakness in productivity growth is only partly due to a cyclical hangover from the pandemic as it also reflects the structural weakness in investment. With investment growth set to remain mediocre, productivity growth will remain lacklustre …
Large US tariffs would hurt China’s export sector but less than many suppose. We estimate that the direct impact of even a 60% US tariff on goods from China would be well under 1% of China’s GDP . The bigger challenge for policymakers could be the …
Negative natural gas prices at a few trading hubs in West Texas, including the Waha Hub, have curiously become the norm this year. This Update looks at five key questions on the topic. 1) Why have natural gas prices at the Waha Hub been getting so much …
6th November 2024
Data released last week showed that the euro-zone’s unemployment rate was unchanged at a record low in September. But a broader assessment of the labour market suggests that it is cooling, and the latest surveys suggest that it will continue to do so. …
5th November 2024
Inflation figures out of Turkey – including those published for October yesterday – have surprised on the upside and forward-looking indicators suggest that the disinflation process will be slow in the coming months too. Consensus expectations for the …
With inflation falling back further in October, growth struggling and the property market in the doldrums, the conditions are in place for the Bank of Korea to cut interest rates again soon. We think the consensus is wrong to rule out the prospect of a …
Although the Reserve Bank of Australia maintained a broadly neutral stance at its meeting today, we still think it will start to lower interest rates as soon as February next year. However, with the labour market remaining resilient and productivity …
OPEC+’s latest delay to its long-held plans to raise output will have a marginal impact on oil supply over 2025. We still suspect that OPEC+’s most likely course of action is to gradually increase output in 2025. However, the risks of a more aggressive …
4th November 2024
While the latest PMIs suggest that global industry started Q4 on a slightly better footing, the outlook for the manufacturing sector remains poor, especially in advanced economies. Meanwhile, although the big fall in DM goods inflation is now behind us, …
The rise in Brazilian local currency government bond yields this year is now on a scale similar to that seen during its fiscal crisis in 2015. Back then, bond yields only started to fall back when wholesale political change was on the horizon. That’s not …
Despite the tick-up in the EM manufacturing PMI in October, manufacturing activity appears to have remained soft and we think this will be the case over the rest of the year. The surveys suggest that goods price pressures were contained last month, but …
We expect interest rates to be cut to around the equilibrium of 3% or so in the US, UK and Australia. But rates in the euro-zone and Canada seem likely to fall below their equilibria next year, troughing at 1.5% and 2%, respectively. This judgement …
Euro-zone investment has been weak since the pandemic. And despite the recent downward revision to our ECB interest rate forecasts, we don’t think it will pick up substantially, given the sluggish outlook for both economic growth and the competitiveness …
1st November 2024
The October PMIs from Asia remained weak and while the PMI surveys aren’t always a good guide to the hard activity data, their recent signals are consistent with our expectation for manufacturing activity in Asia to struggle in the near term, price …
Rate cuts likely to cushion house price slowdown Australia’s housing rally continued to lose steam in October. However, with the RBA set to cut interest rates from early-2025, there are good reasons not to be too bearish on the outlook for house price …
31st October 2024
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
Despite the Riksbank reopening the door to a 50bp cut at its last meeting, we think it will proceed gradually and cut by 25bps next week to 3.0%. This is because the policy rate is approaching the neutral rate and the risks of over loosening are …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will the sector continue to deliver? Join our Commercial Real Estate team for a special online briefing all about the …
We doubt the sell-off in gilts following the Budget will gather momentum and cause another step down in commercial property values. However, given the current narrow spread between risk-free interest rates and property yields, the latter are likely to …
Norway’s economy is struggling and inflation keeps falling faster than Norges Bank expects, yet the Bank has not started loosening policy. Next week we think it will open the door to a December rate cut. At its last meeting in September, Norges Bank said …
The Q3 RICS commercial survey painted a somewhat mixed picture of the market. There was a slight improvement in investment and capital value expectations, but rental expectations were revised down. That highlights that the road to recovery for commercial …
The monetary “day job” is going to get harder We have argued in the past that, although central banks have some tools to help propel the green transition along at the margin, responsibility for tackling climate change is best left to fiscal and regulatory …
BoJ Governor Ueda sounded more optimistic today and we’re sticking to our forecast of another rate hike at the Bank’s next meeting in December, though we don’t expect further tightening in 2025 . It came as no surprise that the Bank left its policy rate …
This report was first published on 31 st October covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st November and on the Caixin services and composite PMIs on 5 th November. Economy continues to regain momentum The PMIs …
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks ease further, regional divergence among fiscal risks Financial vulnerabilities have declined further …
30th October 2024
The South African Medium-Term Budget Policy Statement (MTBPS) was presented as a “pro-growth” statement, but the numbers underscore that the government has no room to loosen the fiscal stance. Continued fiscal austerity will help to sustain investor …
The outbreak of unrest in Mozambique after contested elections is unlikely to have a large impact on growth in the near term. But any attempts by the government to loosen fiscal policy to appease protestors or, further out, disruptions to large gas …
EMs are playing a growing role as substitute markets for Chinese exporters that face rising trade barriers in DMs. A second trade war with a re-elected President Trump would only accelerate that shift. It is plausible that a sizeable portion of the loss …
The outcome of the US election won’t have a sizeable impact on most commodity prices over the next few months. Instead, differences between the candidates’ views on vehicle emissions, LNG exports and foreign policy stance on Iran could affect oil and gas …
29th October 2024
Despite the sharp fall in job openings, September’s JOLTS data show a labour market normalising rather than rapidly deteriorating. With October’s payrolls gain likely to have been hampered by temporary disruptions, the Fed should feel confident to cut …
Our measure of capital outflows from EMs has jumped to its highest level since July 2022 amid the recent surge in US Treasury yields and strengthening of the dollar. If Donald Trump wins the US election, there is plenty of scope for these market moves to …
All our analysis on how the US election could affect emerging market economies can be found on our dedicated webpage . A key risk for Mexico from the US election is that a Trump administration could withdraw from the USMCA free-trade agreement. In a …
Softer rental prospects, less scope for yields to fall and lower income returns look set to weigh on French residential property returns compared to Germany, the UK and the US in the coming years. This Update uses a similar methodology to our recent Focus …
The NCREIF Q3 index posted a positive return for the first time in two years, with only offices recording a negative outturn. But with firmer evidence that poorly capitalized banks have been less likely to mark loans as non-performing, as well as …
28th October 2024
In light of the worsening outlook for economic growth and inflation in the euro-zone, we are making major downward revisions to our ECB interest rate forecast. We now think the Bank will implement back-to-back 50bp rate cuts in December and January, and …
Investor sentiment towards Argentina has improved significantly in the past few months and it now looks like the government will probably be able to make the sovereign debt repayments that are due next year. But there are still no real signs that the …
The possibility of looser fiscal policy than previous planned in the upcoming UK Budget on 30 th October suggests the risks to our forecast that the 10-year gilt yield will fall to 3.50% by end-2025 are skewed to the upside, even if a repeat of the …
New bank lending has risen recently as the interest rates on loans have begun to edge down, but it is still weak. While it will probably continue to increase gradually in the coming months, the ECB might need to cut its policy rates substantially to give …
25th October 2024
